MAJOR COMPONENTS OF THE INCOME STATEMENT
The income statement summarizes the income and expenses of the firm over a period of time. The basic format shows the deduction of costs and expenses, including taxes, from income in order to determine the net profit of the firm for that time period. The equation for the income statement is:
Revenues – Expenses = Net Profit (or Loss)
Figure 17.5 may be divided into the following major sections:
Net Sales $292000
Minus: Cost of Goods Sold - 132000
Equals: Gross Profit $160000
Minus: Expenses - 123000
Equals: Net Income before Taxes $ 37000
Minus: Income Taxes - 7000
Equals: Net Income $30000